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FRS Pension Plan FAQ

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Below is a list of the Pension Plan questions we get asked the most. If you don't see your question answered, or if you have additional questions pertaining to your retirement, click the button below to schedule a meeting with one of our representatives who can help answer your questions at a time convenient for you.

Is my pension taxable?

Your pension is taxable as ordinary income and will contribute to any other earned income for the calendar year.

When am I eligible for retirement?

Hired before 2011 Pension6 years of service and age 62 or 30 years of service, whichever comes first. Penalty 5% per year previous to 62. (regular risk class)

Hired after 2011 Pension- 8 years of service and age 65 or 33 years of service, whichever comes first. Penalty 5% per year previous to 65. (regular risk class)

What are my beneficiary options on the pension plan?

After DROP or retirement date- Upon entering DROP or entering retirement without DROP the member will elect option 1 or 2 (also 3 or 4, if married). In options 2-4 the elected beneficiary will begin receiving their monthly benefit for the remainder of the 10 year period in option 2 or the remainder of their life in option 3 or 4. The actual dollar amounts of these benefits will be illustrated for the member previous to their election at DROP or retirement initiation.

While working- (Regular risk, not in the line of duty) Beneficiary will have the option to receive either pensions contributions to date or a calculation of option 3

When am I eligible for DROP?

Hired before 2011 Pension6 years of service and age 62 or 30 years of service, whichever comes first (regular risk class)

Hired after 2011 Pension- 8 years of service and age 65 or 33 years of service, whichever comes first (regular risk class)

How do I avoid paying taxes on my DROP funds?

Like your pension, your DROP funds are taxed as income. That means that when you take a distribution from DROP you will pay income tax on the amount you distribute. You can defer paying taxes on your DROP funds by rolling over your DROP dollars to a tax qualified account like an IRA, 403b, or even to the FRS investment plan.

What happens if I leave before I am vested?

Employee required distribution will be returned. Member are always 100% vested in the contributions (3% for regular risk) they have made.

Can I come back to work after I retire?

The short answer is Yes, after 12 months there will not be a penalty. Please see full detailed description here.

How much will my pension be?

Once eligible- the pension will be calculated by multiplying these factors

Years of service x 0.016 (regular risk class 1.6%) x Average highest 5 year salary 

Hired before 2011- If age 62 or 30 years of service not met a 5% penalty per year will apply

Hired after 2011- - If age 65 or 33 years of service not met a 5% penalty per year will apply

How does the end of the cost of living adjustment in 2011 effect me?

If you are a pension plan member hired after 2011 you will not have a COLA (Cost of living adjustment) added to your annual benefit when you retire. This is something to consider as you live on a fixed income after you retire that does not grow to combat inflation. For example, social security grows based on increases to annual inflation, or else the payouts from 1935 with a maximum benefit of 60$ per month would not be helping folks out a lot these days. This is something members should consider when planning retirement on the pension plan. For members hired prior to 2011, every year you continue to work now your total annual COLA percent is diminishing. The benefit was 3% prior to 2011, so each year you work past 2011, that 3% total shrinks a little more. A member hired in 1996, planning to retire in 2026 will have 15 years with the COLA, and 15 without, so their annual COLA will only be 1.5%.

What is a 2nd Election?

A 2nd election is when an FRS member decides to change from their current retirement benefit to another. Typically this will be pension members switching to the investment plan, or investment plan to pension. When a pension plan members switches to the investment plan, the member's account will be credited with a starting balance in the investment plan, and then the member's future contributions will be added to the member's investment plan account, with an accompanying employer match. When an investment plan member switches to the pension plan, the process requires the member to trade their investment plan balance for an amount determined by the FRS to "buy back" into the pension. This number can sometimes be quite a bit more than the investment plan member's account value, and in that case the member would have to make up the difference themself if they want to proceed with the 2nd election. 

Additionally, a 2nd election is permanent and members should evaluate the decision in detail before switching plans as they will not have the option to switch back again in the future.

 Should I retire on the pension plan or the investment plan?

This is one of the most important decisions that can be made and is based on your specific situation. A closer comparison is here.

Also, please download our book “Your FRS, your Choice”




Information sourced from MyFRS.com

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